On 18 July 2022, Ofgem delivered its program for faster and more reliable switches. The overhaul of the energy supplier switching program was first discussed back in 2013 and is estimated to have cost £426 million.
Six months on from implementation, here’s our guide to the faster switching program. We’ll review what it means for both businesses and households and discuss the benefits it has delivered.
What is the Ofgem switching program?
To understand the Ofgem switching program, let’s first consider how the energy markets operate.
The market for the supply of electricity and gas to British properties is deregulated. Energy suppliers compete in an open market to provide their customers with the cheapest and best service possible.
To encourage this healthy competition between the suppliers, Ofgem needs to make it as easy as possible for businesses and households to switch between one supplier and another.
The stated aim of the Ofgem switching program is to:
Design and implement a new switching process that is reliable, fast and cost-effective and harmonises processes across gas and electricity.
Under the new switching process, suppliers must offer both domestic and non-domestic meter points the opportunity to switch within five working days. Once the new switching process is entirely up to speed, switching is expected to be reduced further to just two days.
What was wrong with the old energy switching process?
Ofgem was very aware that the previous process for switching energy suppliers wasn’t ideal. The switching processes that home and business energy suppliers follow were designed in the 1990s and were slow and often unreliable.
Typically it took 21 days to switch home energy suppliers. Considering that switching suppliers involves no physical work and is an admin exercise, three weeks was clearly excessive.
A Which survey conducted in 2019 found that 40% of participants found the switching process confusing, and 37% found it too slow.
The process for switching business energy suppliers is even more cumbersome, with the difficulties with electricity and gas switches being dealt with separately.
How does the Ofgem switching program work?
The Ofgem switching program introduces a new Central Switching Service.
The Central Switching Service sits out the centre of the market, allowing the effective transfer of customer data from one supplier to another. With over 100 energy suppliers in the market, the web of communications between them is complicated.
The Central Switching Service expects to transfer billions of individual data points between the different suppliers.
To allow the billing and metering software used by the energy suppliers to interact with the Central Switching Service, a CSS Gateway provides real-time access to read and change data.
The Central Switching Service will also connect with energy comparison and business energy comparison websites to make it as easy as possible for customers.
The new process will initially reduce the switching time to five days and covers the following products:
Who is involved in the Ofgem switching program?
To roll out the switching program, Ofgem has relied on the following third-party contractors:
How has the Ofgem switching program improved business energy switching?
The Ofgem switching program has significantly improved the speed of switching between business energy suppliers.
One business energy supplier, Crown Gas and Power, has said that the effect has been immediate and that they’ve been able to switch 50 customers in the program’s first week.
In 2022 energy prices have been highly volatile, adding another confusion for business owners. But allowing businesses to quickly switch between an unfavourable deemed contract and a fixed-rate agreement with a new supplier is a massive benefit for business owners.
How has the Ofgem switching program improved home energy switching?
Unfortunately, this is yet to be determined.
Currently, the energy price cap is significantly below the actual cost of energy due to the Government’s Energy Price Guarantee.
The Energy Price Guarantee protects people from the actual cost of electricity and gas during the energy crisis. Unfortunately, this does have the effect of freezing competition in the energy market.
No home energy suppliers offer below-price cap prices, so switching volumes have fallen near zero.
We’ll have to wait until 2023 to see the benefits of the Ofgem switching program on the household energy market.